What is Internal Equity versus Internal Inequity?

Could it be just an excuse to pay future hires less because you won’t give your strong internal talent a raise?

What is internal equity? In short, internal equity is the fairness of pay in a workplace.

Are you paying people a salary that is commensurate with their skill and experience? Is your pay fair regardless of gender or race? If so, you have internal equity.

However, most companies may have a discrepancy of what they are paying existing employees and what they need to pay future employees. Don’t lose your best talent and don’t skip great talent because you’re not in the loop of higher wage trends.

“Internal equity is commonly discussed when we go through the details of a new search for our clients. Many times, we are reviewing the compensation an employer is paying long-term employees who are doing a great job. Then the sticker shock comes when we explain that a new hire with that talent costs much more than expected. The current job market is a true war for talent, and we need to remember that the candidates are driving the decisions!” says Sharon Tsao, CMO of Contemporary Staffing Solutions.

How can you ensure that your company doesn’t have a GAP and ultimately inequity? Go over the process outline below. Though it may seem time consuming, it is important for attracting and keeping satisfied and loyal employees, as it shows the employer truly cares about by doing right by employees. To ensure salary information is accurate and up to date, a salary and market data audit should be conducted annually or even bi-annually.

Conduct internal salary audits

Don’t let the word “audit” send you into a panic—this is a good audit. Providing reasonable pay first starts with looking at what you’re currently paying people and comparing pay rates. Maybe two payroll employees have very similar job descriptions, but one is getting paid less for arbitrary factors, like the employees have two different job titles or their education is slightly different. Take note of these discrepancies as you move on to the next part.

Look into market data

Accounting for internal salaries is part one of achieving internal equity: the other part is comparing this data to external data. Research what other companies pay for the same / similar positions your company has. To get a generalized overview of pay for positions, visit PayScale and CareerBuilder’s Supply and Demand tool. PayScale and CareerBuilder can provide insight into the average pay of certain positions and in certain areas. If, through internal and external audits, you find that the pay your company offers is less than it should be, adjust accordingly!

Be transparent about pay

Through the National Labor Relations Act, it is illegal for employers to forbid employees to talk to each other about pay. Since employees will likely talk about pay with one another, get ahead of the curve. Sit down with your direct reports and explain to them that this salary was determined by analyzing market data and internal pay processes in relation to their job description and skillset. This could also be a good time to discuss future promotion paths and what they look like.

“It’s in a company’s best interest to offer a fair salary. If a great candidate is considering an opportunity with your company but a competitor has better pay, the you’ll miss out on talent. In order to keep great talent, you have to make sure you offer competitive pay and pay that is appropriate within the company and the market,” says Steve Scovner, Account Executive at Contemporary Staffing Solutions.

If you think you aren’t being paid fairly, conduct some of the outside research mentioned above. If your research proves your claim, speak up. Schedule time to speak with a HR representative to discuss this and present your case. You may not be alone! If other employees have also discussed the matter with HR, there is an excellent chance that proper pay can be talked about with decision-makers and they can reconcile the issue by developing true internal equity.

Looking for your next hire and need to understand the supply and demands of a specific skill set?  Call today and partner with one of our wonderful recruiters to help you in your job search!

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Contemporary Staffing connects job seekers to hiring managers nationally in the following professions: Accounting & FinanceCall Center & OfficeHuman ResourcesITSalesforce, and Sales & Marketing.